In recent history, the real estate industry has become a prime target for cybercriminals, and third-party wire transfer fraud is a significant threat that real estate professionals should always watch out for. According to the National Association of REALTORS®, it continues to be one of the most prevalent cybercrimes in the United States to this day.¹ Third-party wire transfer fraud involves unauthorized parties, cybercriminals, intercepting or manipulating wire transfer instructions, which leads to substantial financial loss for all parties involved in the transaction.

This type of cybercrime typically occurs when cybercriminals gain unauthorized access to email accounts or communication channels of real estate agents, title companies, or buyers. They then monitor any communication related to transactions and strategically send fraudulent wire instructions to divert funds to their own account. Often, these fraudulent emails so closely mimic legal communications that it’s difficult to detect what is real and what is fraudulent.

Case Studies

Here are a couple of recent examples of third-party wire transfer fraud to give you an idea of how these cybercriminals work.

1. Connecticut Homebuyer²
In this case, a Connecticut homebuyer lost almost $600,000 after cybercriminals hacked a law firm’s email system and sent fraudulent wire instructions. Believing the email to be legitimate, the homebuyer transferred the funds, which were quickly moved through various accounts and made recovering the funds challenging. Thankfully, the homebuyer was able to recover the full amount.

2. Tech Executive Scam³
A tech executive from Silicon Valley fell victim to a similar scam as the Connecticut homebuyer, losing $400,000. In this case, the cybercriminals sent an email that appeared to come from her mortgage broker, instructing her to wire funds to a fraudulent account. Despite immediate action upon the fraud’s discovery, recovering the funds proved to be complex. However, the executive eventually recovered all $400,000.

Mitigation Strategies

It’s important to protect yourself against third-party wire transfer fraud as it can be harmful to both you and your clients. Here are some best practices you can implement into your real estate practice to prevent fraud.

• Use verification protocols. Always confirm the authenticity of wire instructions through a trusted method, such as a phone call from a known number,¹ before initiating a transfer.
• Enact employee training. Regularly train staff to recognize different forms of fraudulent communication. Encourage an environment where employees feel empowered to question any unusual requests or changes in standard procedures.
• Utilize secure communication channels. Use encrypted email services and secure communication platforms to exchange sensitive information, such as banking or personal information. When possible, avoid sharing wire instructions via email and instead use secure portals or in-person delivery.
• Educate clients. Make sure your clients know about the risks of wire fraud and advise them on secure practices they can implement. Give them clear instructions on how your practice handles wire transfers and emphasize the importance of verifying any communication that involves financial transactions.
• Obtain insurance coverage. Consider securing cyber liability insurance coverage that specifically covers wire transfer fraud. Traditional errors and omissions (E&O) insurance policies may not cover losses from cyber fraud, so it’s essential to review and update your coverage accordingly.⁴

Though wire fraud isn’t a new issue in the world of real estate, it’s something that real estate professionals constantly need to be on high alert for as there continues to be a rising tide of cybercriminals hacking emails and sending fraudulent wire instructions. Implementing these best practices and other risk management practices can help you avoid fraud and costly claims.

Third-party wire transfer fraud poses a significant risk in real estate transactions, but by implementing proactive measures, real estate professionals can help mitigate this threat and better protect themselves against these sophisticated cyber threats.

It’s vital to have a comprehensive E&O policy that will defend you should claims arise. Pearl Insurance has specialists with 40+ years of combined experience ready to help you. If you have questions about E&O insurance or the claims process, schedule a time to talk to our experts.

Pearl Insurance is committed to helping you manage your risk. Our carrier, AXA XL, rated A+ (Superior) on AM Best, has been partnering with Pearl for 20 years, providing you with the best E&O protection.

Ready to get a quote for your E&O insurance? Give our experts a call at (855) 465-0200 or click on the button below to fill out a quote form.

Get a Quote   Talk to an Expert

Want to know more? Find out for yourself.
(855) 465-0200 | pearlinsurance.com/professional-liability-insurance/

¹“Wire Fraud.” NAR, 2023.

²“Connecticut homebuyer loses $600K to hacker theft.” New York Post, 5 August 2024.

³“Tech executive falls for $400,000 scam while buying ‘cursed’ house.” The Times, 25 July 2024.

⁴“Errors & Omissions Insurance.” Ramquest. April 201.